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In Epic Games v Apple, temporary relief for Unreal Engine, but not Fortnite

Credit: Fortnite blog

In a significant development, a California district court, on August 24, handed Epic Games a partial temporary restraining order against Apple — essentially ruling that Apple can not terminate Epic’s graphics engine Unreal Engine’s access to Apple’s operating systems. However, in the same ruling, the court held that Apple doesn’t have to allow Epic’s popular game Fortnite on its App Store. The next hearing is scheduled for September 28, as this ruling is limited in scope, and was meant to preserve the status quo until the parties can submit further arguments.

Apple, and Google had removed Fortnite from their app stores after Epic introduced an in-game payment system which completely bypassed their mandated in-app purchase guidelines. In return, Epic sued Apple (and Google too), claiming that it was behaving like a monopoly, and simultaneously released a video mocking Apple. In retaliation, Apple threatened Epic that it will terminate all of its developer accounts — which includes Unreal Engine — and cut Epic from iOS and Mac development tools by August 28.

This action against Unreal Engine didn’t go down well with developers who rely on the Unreal Engine, an industry standard development tool used to develop games like PUBG and Mortal Kombat, and TV shows like The Mandalorian. Microsoft — which uses Unreal Engine to develop its mobile gaming app Forza — publicly backed Epic’s lawsuit saying that it has an “enterprise-wide, multi-year Unreal Engine license agreement and has invested significant resources and engineer time working with and customizing Unreal Engine for its own games on PC, Xbox consoles, and mobile devices (including iOS devices).”

‘Epic-Apple dispute should not create havoc to bystanders’: Court

“The battle between Epic Games and Apple has apparently been brewing for some time. It is not clear why now became so urgent,” Judge Yvonne Gonzalez Rogers, who was hearing the case said in an order. Here’s her reasoning behind favouring Unreal Engine, and at the same time, not allowing a restraining order for restoring Fortnite:

Epic is free to fix Fortnite’s alternate payment method: “Epic Games strategically chose to breach its agreements with Apple which changed the status quo. No equities have been identified suggesting that the Court should impose a new status quo in favor of Epic Games,” Rogers said. She held that Epic is free to maintain its agreements with Apple. Epic itself admitted that the technology exists to “fix” the problem easily by deactivating the “hotfix.” she held.

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No ‘irreparable harm’ to Epic viz. Fortnite: On Epic’s claim about “irreparable harm”, the court said that “self-inflicted wounds are not irreparable injury.”, and that Epic has not yet demonstrated irreparable harm. “The current predicament appears of its own making,” it said.

Epic has a separate license for Unreal Engine: Rogers said that Epic appears to have separate developer program license agreements with Apple and “those agreements have not been breached”. If Apple were to cut Unreal Engine’s access from its platform, it will lead to “nebulous, hard-to-quantify questions”, such as the success of third-party projects currently being developed on Unreal Engine, and how much in royalties would have been generated.

“In this regard, the contracts related to those applications were not breached. Apple does not persuade that it will be harmed based on any restraint on removing the developer tools. The parties’ dispute is easily cabined on the antitrust allegations with respect to the App Store. It need not go farther. Apple has chosen to act severely, and by doing so, has impacted non-parties, and a third-party developer ecosystem. In this regard, the equities do weigh against Apple.” — Judge Rogers

Contractual obligations outweigh public interest for Fortnite, but not for Unreal Engine: “[…]Fortnite players are passionate supporters of the game, and eagerly anticipate its return to the iOS platform. The Court further recognizes that during these coronavirus pandemic (COVID-19) times, virtual escapes may assist in connecting people and providing a space that is otherwise unavailable. However, the showing is not sufficient to conclude that these considerations outweigh the general public interest in requiring private parties to adhere to their contractual agreements or in resolving business disputes through normal, albeit expedited, proceedings,” Rogers held.

However, with respect to Unreal Engine and developer tools, “the calculus changes”, she said. “The record shows potential significant damage to both the Unreal Engine platform itself, and to the gaming industry generally, including on both third-party developers and gamers. The public context in which this injury arises differs significantly: not only has the underlying agreement not been breached, but the economy is in dire need of increasing avenues for creativity and innovation, not eliminating them. Epic Games and Apple are at liberty to litigate against each other, but their dispute should not create havoc to bystanders,” she added.

On the 30% Apple tax: “Epic Games moves this Court to allow it to access Apple’s platform for free while it makes money on each purchase made on the same platform,” Rogers said. “Not even Epic Games gives away its products for free,” she added.

Apple v developers

Epic is just one example of a developer seemingly unhappy with the 30% commission Apple charges on most in-app purchases while simultaneously prohibiting developers from even linking users out of the app to a separate web page to purchase in-app items or subscriptions. Just last week, Digital Content Next — an association that includes New York Times and Washington Post — asked Apple how member news publishers can “qualify for the arrangement Amazon is receiving for its Amazon Prime Video app in the Apple App Store”, after it was revealed in the US Congressional antitrust hearings that Apple was allowing Amazon to keep 85% of the revenue from subscriptions on Amazon Prime on iOS.

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Before that, Microsoft, subscription email service Hey, and Match Group, the parent of dating app Tinder, have all criticised the 30% commission Apple charges over in-app purchases. Complaints by Spotify and Rakuten over these issues also resulted in antitrust scrutiny against Apple in the EU, which is currently underway.

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